USMCA UPS Tradenomics Webinar

2019 UPS® Tradenomics Webinar Series
USMCA: What does it mean and what is in store
May 14, 2019
3:00PM ET
Today’s webinar will begin shortly
Also: special Section 301 tariffs update

Proprietary and Confidential: This presentation may not be used or disclosed to other than employees or customers, unless expressly authorized by UPS. This document is for informational purposes
only. It does not constitute legal advice – please consult with your own legal counsel for such advice. Also, do not rely on this information without performing your own research.
© 2019 United Parcel Service of America, Inc. UPS, the UPS brandmark, the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
UPS Tradenomics Webinar Series
Presenters
• Host
• Greg Maddaleni, LCB, JD
• Customs Brokerage Sr.
Manager
• Panelist
• Dontai Smalls, JD
• Senior Vice President,
UPS Global Public
Affairs
• Panelist
• Kelly Wilton, LCB
• Customs Brokerage
Compliance Manager

Agenda
3
Any questions?
Ask our panelists using the “Q&A” function
1 CCS/CES/MES Credit
USMCA
• Free Trade Agreements and Trade Promotion Authority
• North American Trade at a Glance
• From NAFTA to USMCA
• Highlights of the USMCA and Customs Improvements
• Current State of Play in the U.S., Canada, and Mexico
• Timeline to Implementation
• Tradenomics: Special Section 301 Update
• Q&A

Please note
This presentation is for informational purposes only. It does not constitute legal advice – please
consult with your own legal counsel for such advice. Also, do not rely on this information without
performing your own research.

Please note
This presentation will be available upon check out to all attendees as well as a link to the event
recording.

A Free Trade Agreement, or FTA, is an
agreement between two or more countries to
reduce international trade barriers.
FTAs remove traditional trade hindrances such
as import quotas and tariffs in order to bolster
trade of goods and services across borders.
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https://ustr.gov/trade-topics/trade-promotion-authority
Trade Promotion Authority (TPA)
Since 1974, Congress has enacted TPA legislation
that defines U.S. negotiating objectives and
priorities for trade agreements and establishes
consultation and notification requirements for
the President to follow throughout the negotiation
process.
TPA defines the terms, conditions and
procedures under which Congress allows the
Administration to enter into trade agreements, and
sets the procedures for Congressional consideration
of bills to implement the agreements.
At the end of the negotiation and consultation
process, Congress gives the agreement an up or
down vote, without amendment. TPA reaffirms
Congress’s overall constitutional role in the
development and oversight of U.S. trade policy.

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35 Million People
$1.7 Trillion
$0.76 USD = C$1.00
US Exports: $332 B
MX Exports : $10 B
United States – 73.7%
United Kingdom – 4.2%
China – 3.8%
C$40 for Tax-Free & Duty-Free
C$150 for Duty-Free Shipments
336 Million People
$19.5 Trillion
$1.00 USD Standard
CA Exports : $341 B
MX Exports : $276 B
Canada – 12.1%
Mexico – 10.4%
China – 5.5%
$800
117 Million People
$1.2 Trillion
$1.00 USD = ₱19.17 MXN
CA Exports : $11 B
US Exports : $340 B
United States – 79.9%
Canada – 2.8%
Germany – 1.7%
$50
$117 For Duty-Free
Shipments
Source: 1) https://countryeconomy.com/ 2) Office of USTR & Gob.MX Economic Figures
Population
2017 GDP
Currency
North American
Export Value (2017)
Top Trading
Partners
(Exports)
De Minimis
Exchange Rates as of 1/30/2019
Canada United States Mexico
USMCA – Country Statistics At A Glance

From NAFTA to USMCA
Canada, Mexico & The U.S. signed a new trade
deal, known as USMCA, on November 30, 2018
• NAFTA provided for:
• Non-discriminatory market access for goods & services
• Investment opportunities and protections
• Ability to compete for major government procurement contracts
• USMCA builds on that to include:
• New digital trade and labor provisions
• Commercially meaningful de minimis thresholds & level playing
field
• Harmonization of and cooperation on pre-clearance
• Reduction in time-consuming and costly brokerage complexities
https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/fact-sheets
https://www.businessinsider.com/us-canada-mexico-trade-deal-usmca-nafta-details-dairy-auto-dispute-resolution-2018-10

Major Highlights Of The USMCA Trade Agreement
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Auto Rules of
Origin
By 2023, 75% of certain
automobile components must by
made in the U.S., Canada, and
Mexico in order to qualify for
zero tariffs (up from 62.5% in
NAFTA)
By 2023, 40-45% of auto parts
must be made by workers
earning at least $16 per hour.
Intellectual
Property
This chapter is a substantial
improvement over the original
NAFTA – it includes strong
enforcement measures, including
broader authority for border
officials to stop goods suspected
of being pirated or counterfeit.
The chapter also provides ten
years of data protection for
biologic drugs.
Digital Trade
The USMCA safeguards cross-
border data flows, guarantees
the freedom to move data across
borders, and prohibits forced
localization.
USMCA promotes a collaborative
approach to addressing
cybersecurity challenges to keep
networks and services secure.
SMBs Promotion
The USMCA includes a 16-year expiration date and a provision that requires review of the deal every six years
Sunset Provision
Source: Business Insider
Exchange Rates as of 1/30/2019
The USMCA calls for cooperation
to promote startups, rural and
agricultural SMBs, as well as
SMBs owned by women and
other underrepresented groups.
A new “Committee on SME
Issues” will provide government
support to entrepreneurs
seeking international suppliers,
buyers and other potential
business partners.

Customs Changes
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New Delivery Services Annex with First-Ever
Postal Parity Disciplines:
The USMCA incorporates a new industry annex that
specifically addresses the treatment of postal entities.
Higher-Standard Border Processes:
The parties will adopt practices on risk management,
pre-arrival processing, and efficient release of goods.
Customs administrations will now be required to focus
inspection activities on high-risk goods and provide for
the electronic submission of documentation in advance
of the arrival of the goods to expedite their release
upon arrival.
https://crsreports.congress.gov/product/pdf/R/R44981

Customs Changes
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Higher De Minimis:
Canada’s new de minimis thresholds will be C$40
(US$31) for duty and tax-free treatment and C$150
(US$117) for just duty-free treatment, up from the
current C$20 threshold.
Mexico’s de minimis will remain at US$50 for duty and
tax-free treatment, and it will also have a US$117
threshold for duty-free treatment. The postal de
minimis threshold now matches that of private
couriers.
The U.S. Administration has tried to advance a harmful
reciprocal de minimis regulatory change in the U.S.,
which UPS and a coalition of other likeminded
companies are countering
https://crsreports.congress.gov/product/pdf/R/R44981

Rules of Origin
https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-
agreement/agreement-between
HTS# 8414.90 (parts of air compressors) HTS# 8708.10 (bumpers for passenger vehicles)
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USMCA
A change to subheading
8414.90 from any other
heading, or
No required change in tariff
classification to subheading
8414.90, provided there is a
regional value content of
not less than
a) 60% where the
transaction value method
is used, or
b) 50% where the net cost
method is used.
NAFTA
heading, or
No required change in
tariff classification to
subheading 8414.90,
provided there is a
not less than
a) 60% where the
transaction value
method is used, or
b) 50% where the net
cost method is used.
NAFTA USMCA
subheading, or
8708.10 from subheading
8708.99, whether or
there is also a change
from any other heading,
provided there is a
not less than 70% when
the net cost method is
used.
subheading, or
8708.10 from
subheading 8708.99,
whether or there is also
a change from any other
heading, provided there
is a regional value
content of not less than
50% when the net cost
method is used.

USMCA, Article 5.2: Claims for Preferential Treatment
14
USMCA Requirements:
Importer of Record must make the claim for preferential
treatment.
Certificate of origin may be prepared/signed by the
exporter, producer or importer.
Certificate of origin need not follow a prescribed format,
but must contain a minimum set of data elements. May
be provided on an invoice or any other document,
including electronically with a digital signature.
If the person completing the Certificate of origin is not
the producer of the good, the certificate may be produced
with “reasonable reliance on the producer’s written
representation, such as a certificate of origin, that the
good is originating”
NAFTA Requirements:
Importer of Record must have valid NAFTA
Certificate of Origin (Form 434) on hand at time
of claim.
NAFTA Certificate of Origin may be
prepared/signed by Exporter of the goods.
If Exporter is not producer, he may claim as
evidence of qualification that:
a) he has first-hand knowledge that the goods
qualify;
b) he can reasonably rely on a written statement
from the producer that the goods qualify, or
c) he has a NAFTA certificate from the producer.
Source: https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/05_Origin_Procedures.pdf

USMCA Current State of Play
• President Trump has threatened to withdraw from
NAFTA 1.0 to encourage swift ratification.
• Canada and Mexico will reportedly only begin work on
ratification once the U.S. has completed domestic
procedures. Canadian elections on October 21, 2019
may also factor into the timing.
• U.S. Congress must give up or down vote and pass
implementing legislation – the desired timing was
April/May, but will more likely happen in September.
• The U.S. International Trade Commission released its
report on the impact of the USMCA, confirming that
the agreement would lead to favorable growth for the
U.S. This was an important step in moving the
process forward.

• Both sides of the aisle have their concerns:
• Senate Republicans have warned
President Trump that the USMCA isn't
going anywhere unless he removes steel
and aluminum tariffs on Canada and
Mexico.
• House Democrats are saying that the
USMCA won’t be tabled for a vote without
addressing party concerns over
enforcement, labor and environmental
and pharmaceutical provisions in the text
of the deal, pushing back against
alternatives such as a side letter or later
legislation.

In Mexico:
Mexico made significant progress towards the
ratification of the USMCA with the passage of the
labor reform bill that has been under discussion in
Congress since the beginning of the year. The reform
aims to bring Mexico in line with international labor
rights standards. Among other changes it:
• Guarantees the right to union membership;
• Guarantees free and secret elections for union
leadership;
• Creates a new independent dispute resolution
system;
• Creates a public register for all collective
bargaining contracts;
• Bans ‘white unions’ (unions created/controlled by
employers);
In Canada:
The Government of Canada’s parliamentary review of
the USMCA passed the minimum 21-day waiting
period on March 18, 2019. The Cabinet may now
issue implementing legislation and a directive to ratify
the agreement at its discretion, although the
Government of Canada has indicated this will likely
not occur until the U.S. process for ratification
nears completion.
In March 2019, Canada’s Minister of Foreign Affairs,
Chrystia Freeland, hinted that the Government of
Canada is additionally seeking relief from U.S. Section
232 tariffs on steel and aluminum, before USMCA
ratification moves ahead.

In the U.S., we expect legislation to be
introduced in the next several weeks
and to be considered by Congress
within the next few months.
Note that the Administration is
pushing for an April/May vote on the
USMCA.
However, the actual timing of the vote
is uncertain and remains dependent on
the pace of bicameral and bipartisan
discussions on the agreement.
The Road To USMCA:
USMCA Is Signed, But Still Needs To Be Ratified By Each Country’s Government
To ratify the agreement, legislatures
must prepare domestic laws and
regulations to comply with the
provisions and officially vote for the
USMCA to enter into force.
JANUARY 2019
UPS BEGINS TO FAMILIARIZE NEW MEMBERS
OF CONGRESS WITH BENEFITS OF THE USMCA
USTR SUBMITS FINAL TEXT OF THE
USMCA, DRAFT IMPLEMENTING
LEGISLATION, AND ENFORCEMENT PLAN
IMPLEMENTING LEGISLATION INTRODUCED IN THE
HOUSE AND SENATE
• 45 Legislative Days After Bill Introduced: Ways & Means
Must Procedurally Report Bill to the House Floor*
• 15 Legislative Days Later: House of Representatives Must
Vote on the Bill
• 15 Legislative Days After House Votes: Senate Finance
Committee Must Procedurally Report the Bill to the
Senate Floor
• 15 Legislative Days Later: Senate Must Vote on the Bill
CONGRESS SUCCESSFULLY
PASSES USMCA LEGISLATION
USMCA ENTERS INTO FORCE AFTER
CANADA AND MEXICO’S LEGISLATURES
ALSO PASS THE AGREEMENT
JANUARY 29, 2019
USTR TRANSMITS LEGISLATIVE
CHANGES REQUIRED TO COMPLY
WITH USMCA
JANUARY 2019
UPS FIGHTS AGAINST ADMINISTRATION
MOVE TO CHANGE DE MINIMIS
DECEMBER 2018
UPS PROVIDES INPUT ON DRAFT ITC
IMPACT ASSESSMENT
NOVEMBER 30, 2018
AGREEMENT SIGNED BY
U.S., MEXICO, AND CANADA
NOVEMBER 6, 2018
MIDTERM ELECTIONS:
DEMOCRATS TAKE HOUSE
OF REPRESENTATIVES
SEPTEMBER 30, 2018
PARTIES SHIFT FOCUS FROM OLD
“NAFTA” TO 21ST-CENTURY “USMCA”
AUGUST 16, 2017
NEGOTIATIONS BEGIN
JUNE 27, 2017
UPS TESTIFIES BEFORE USTR TO
ADVANCE CUSTOMS MODERNIZATION
JUNE 12, 2017
UPS RESPONDS TO FEDERAL REGISTER NOTICE
WITH CROSS-BORDER RECOMMENDATIONS
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UPS is working to ensure USMCA benefits UPS customers
19
UPS supports the USMCA as it brings the trilateral trade relationship
into the 21st century with provisions that will boost economic growth
and promote job creation.
Specifically, the agreement contains significant improvements to customs
regulations and digital trade rules that enable UPS to better support our
customers’ North America supply chains.
While the ratification and implementation process is still ongoing,
UPS continues to ensure that the new agreement works in the best
interests of businesses and consumers.

UPS® Tradenomics:
The economic impact of trade on your business
20
Section 301 Update
• List 3 original additional duty rate: 10%, effective September 24, 2018
• Originally scheduled to increase to 25% on January 1, 2019
• Then postponed to March 2, 2019
• Further postponed
• May 9, 2019: the US Trade Rep (USTR) announced an increase to 25% for goods:
• Entered for consumption, or withdrawn from warehouse for consumption, on
or after 12:01 am ET on May 10, 2019 and
• Exported to the US on or after May 10, 2019
• Rate remains at 10% for goods:
• Entered for consumption, or withdrawn from warehouse for consumption, on
or after 12:01 ET on May 10, 2019 but before June 1, 2019, and
• Exported to the US before May 10, 2019
Sources: https://www.akingump.com/en/news-insights/ustr-increases-section-301-tariffs-on-list-3-products-and.html
https://ustr.gov/sites/default/files/enforcement/301Investigations/May_2019_Proposed_Modification.pdf

UPS® Tradenomics:
21
Section 301 Update
CBP issued the following reporting instructions in CSMS #19-000236 and
#19-000238:
1. Importers should report subheadings 9903.88.03 or 9903.88.04 for List 3
goods subject to the 25% duty rate.
2. Importers should report subheading 9903.88.09 for List 3 goods subject to
the 10% duty rate.
3. Importers who have paid 25% duties on goods eligible for the 10% rate
may file Post-Summary Corrections to request duty refunds.
Sources: https://www.akingump.com/en/news-insights/ustr-increases-section-301-tariffs-on-list-3-products-and.html

UPS® Tradenomics:
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Section 301 Update: ‘List 4’
• Published by USTR on 5/13/19, with proposed duty of “up to 25%”
• Contains nearly all HTS numbers not previously included in List 1, 2, or 3
• Of notable exception are certain pharmaceutical goods, medical
goods, and rare earth minerals
• Public comments are requested by 6/17/19, to include:
• Should certain HTS numbers remain on the list or be removed?
• What is the amount of duty that should be assessed?
• Will this duty be effective in getting China to discontinue the policies
that are deemed to be unfair/harmful?
• Will this duty cause disproportionate harm to the US economy?
https://www.strtrade.com/news-news-list-4-China-301-tariff-USTR-051319.html

• Classification
• Exclusion evaluation
• Duty drawback
• Reconciliation
For more information:
• STTAS.com
• Solutions@STTAS.com
• Your UPS representative
• Contact Greg Maddaleni at gmaddaleni@ups.com
Ways to address some of the negative impacts of the tariffs

Questions and Answers
USMCA
• Check Out:
• Feedback / value
• Follow up inquiry or consultation
• For more information contact Greg Maddaleni at gmaddaleni@ups.com
For more information:

USMCA UPS Tradenomics Webinar

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